Download This PaperKindleberger Cycles & Economic Growth: Method in the Madness of Crowds?
NBER Working Paper Series 28411 (2021)
32 Pages Posted: 22 Mar 2021 Last revised: 13 Apr 2022
Date Written: February 10, 2021
Abstract
Because positive spillovers give investment in innovation a social rate of return several times higher than its internal rate of return to innovators, innovation is chronically underfunded. Recurrent manias, panics, and crashes in stock markets inundate “hot” new technologies with capital. To the extent that manias compensate for chronic underinvestment in innovation, competition at the economy-level may favor institutions and behavioral norms conducive to innovation-related bubbles despite ultimately low returns to the hindmost investors.
Keywords: Endogenous growth, financial crises, creative destruction, economic selection, bubbles are good
JEL Classification: G01, G02, G4, N2, O16, O3, O33, O4, P1
Suggested Citation: Suggested Citation
Randall K. Morck (Contact Author)
University of Alberta - Department of Finance and Statistical Analysis ( email )
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European Corporate Governance Institute (ECGI) ( email )
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